Business confidence in the East Midlands fell five points during August to 25%, the lowest reading of all UK nations and regions, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in the region reported lower confidence in their own business prospects month-on-month, down 13 points at 24%. When taken alongside their optimism in the economy, up two points to 27%, this gives a headline confidence reading of 25%.
East Midlands businesses identified their top target areas for growth in the next six months as investing in their team (44%), diversifying into new markets (32%) and evolving their offer (28%). The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide. A net balance of 27% of businesses in the region expect to increase staff levels over the next year, up 12 points on last month.
Overall UK business confidence increased to its highest level since February last year, jumping 10 points to 41% in August. All 11 regions and nations reported a positive business confidence reading in August, with nine regions and nations reporting a higher confidence reading month-on-month.
Optimism in the UK economy also increased in August by 16 points to 37%, and the number of businesses expecting an increase in their trading prospects rose by three points to 46%.
Businesses in London reported the highest levels of business confidence at 52% (up 20 points month-on-month), its strongest reading in 14 months. Firms in the South East reported the second highest reading at 47% (up 17 points month-on-month), followed by those in the South West at 46% (up 12 points month on month).
The construction, retail and service sectors all saw a rise in business confidence in August. Services gained 12 points to reach a 22-month high of 42%, while retail firms were up nine points to 44%, an 18-month high. Construction firms’ confidence also increased by 11 points to a four-month high of 42%. In contrast, manufacturing confidence fell for a second consecutive month with a 4-point decline to 30%, taking it to the lowest level since April 2023.
Dave Atkinson, regional director for the East Midlands at Lloyds Bank Commercial Banking, said: “Despite a slip in confidence in the East Midlands this month, businesses remain focused on the future. They continue to identify opportunities for growth, in particular focusing on developing their teams.
“In order to ensure they have the capital to attract, retain and train talent, businesses need to keep a close eye on their cash flow as we go through the latter half of the year. Lloyds Bank will be by the side of the region’s firms to support them with the financial tools they need as they invest in their workforce and the future.”
Hann-Ju Ho, senior economist, Lloyds Bank Commercial Banking, said: “The bounce in economic optimism this month is the standout point. Our analysis shows that businesses felt relief that interest rates may be reaching their peak, alongside hopes that measures to tackle inflation are having an impact.
“With trading prospects remaining stable, and hiring and wage intentions also rising, the macro environment for small businesses and those outside the manufacturing sector is more upbeat.
“From the data, large firms and manufacturers are experiencing some degree of caution, which is likely to reflect the wider global economic environment and, for manufacturing, the rotation of spending towards services.”
